Many social critics wag their fingers at what they perceive to be frivolous luxury spending. But that misses the point that consumption norms are local. It's not just the rich who spend more when they get more money. Everyone else does, too. The mansions of the rich may seem over the top to people in the middle, but the same could be said of middle-class houses as seen by most of the planet's seven billion people.
Robert H. FrankWe've long known that firms can pay higher wages if they spend less on workplace safety enhancement. Libertarians ask, "If a worker is willing to accept higher wages in return for his agreement to exercise greater caution while performing his job, why should the government prevent him from making that choice?" It's a rhetorically powerful question, yet it overlooks the fact that the agreement in question will have adverse effects on others.
Robert H. FrankGetting the economy back on its feet is properly viewed as an investment in future prosperity. When businesses and consumers confront attractive investment opportunities, often the only way to seize them is by borrowing. The same is true for government. Contrary to the pronouncements of critics of economic stimulus, these investments will not impoverish our grandchildren. Continuing to allow the economy to languish in recession is the surest way to impoverish them.
Robert H. FrankA good school is a relative concept, and the better schools are located in more expensive neighborhoods. But when everyone bids more for a house in a better school district, they succeed only in bidding up the prices of those houses. As before, 50 percent of all children will attend schools in the bottom half of the school quality distribution. As in the familiar stadium metaphor, all stand, hoping to get a better view, only to discover that no one sees better than if all had remained seated.
Robert H. FrankFor the three decades after WWII, incomes grew at about 3 percent a year for people up and down the income ladder, but since then most income growth has occurred among the top quintile. And among that group, most of the income growth has occurred among the top 5 percent. The pattern repeats itself all the way up. Most of the growth among the top 5 percent has been among the top 1 percent, and most of the growth among that group has been among the top one-tenth of one percent.
Robert H. FrankIf government is inevitable, the challenge is to come up with the most effective one possible.
Robert H. FrankNo one could argue with a straight face that the couples getting married today are much happier just because their wedding celebrations cost three times as much as those in 1980. Bigger mansions and costlier parties are wasteful in the same sense that larger antlers on all bull elk are wasteful. The good news is that simple changes in the tax system can eliminate much of this waste without having to deny people the right to decide for themselves how best to spend their money.
Robert H. Frank